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December 24, 2011

On December 8, 2011, the U.S. Department of Treasury, Office of Foreign Assets Control (“OFAC”) issued a final rule[1] that amended the Sudanese Sanctions Regulations (“SSR”) by creating two new general licenses that significantly ease remaining restrictions on transactions with the newly independent Republic of South Sudan (“South Sudan”), including with its oil and gas industry.[2] The new general licenses (31 C.F.R. §§ 538.536 and 538.537), which are effective immediately, now authorize the following:

All activities and transactions relating to the petroleum and petrochemical industries in South Sudan and related financial transactions (31 C.F.R. § 538.536)

The transshipment of goods, technology and services through Sudan to or from South Sudan and related financial transactions (31 C.F.R. § 538.537)

The collective impact of the new general licenses is significant in that transactions by U.S. persons with South Sudan that had remained prohibited even after South Sudan became independent on July 9, 2011[3] are now authorized including:

Export of goods, services and technology to South Sudan’s petroleum or petrochemical industries.[4]

Transshipment of goods, technology, and services to or from South Sudan through Sudan

Oilfield services

Exploration, development, production and field auditing services

Activities related to oil and gas pipelines

Investment

Transport of petroleum from South Sudan through Sudan (except for refining in Sudan)

Payments to the Government of Sudan (or entities it owns or controls) of pipeline, port and other fees

All financial transactions ordinarily incident to the above activities including, but not limited to, financial transactions with a depository institution owned or controlled by the Government of Sudan or located in Sudan provided that such transactions must first transit through a depository institution not owned or controlled

The new general licenses do not authorize the export of goods, services or technology that are not used in connection with South Sudan’s petroleum or petrochemical industries or the transport of petroleum from South Sudan for refining in Sudan. In addition, all other activities and transactions that are prohibited by the SSR, including those relating to the petroleum and petrochemical industries in Sudan, continue to be prohibited.

Conclusion

These two new general licenses create significant business and investment opportunities for U.S. companies seeking to engage in activities related to South Sudan’s petroleum and petrochemical industries. However, companies considering engaging in transactions with South Sudan should continue to conduct thorough due diligence to determine whether any particular transaction may implicate the remaining restrictions in the SSR. Interested companies should also be aware of the continuing instability in South Sudan given its ongoing dispute with Sudan over certain of South Sudan’s oil resources.

Members of Fulbright’s International Trade Practice group will continue to monitor developments in Sudan and South Sudan closely and will provide additional updates as appropriate.

Fulbright’s International Trade Practice Group Fulbright’s International Trade Practice Group is comprised of experienced attorneys in several of Fulbright’s offices throughout the world. Attorneys in the group assist clients in matters concerning international trade laws and regulations; including economic sanctions regulations, export/import control regulations, anti-boycott regulations, and anti-corruption laws.

---[1] http://www.treasury.gov/resource-center/sanctions/Programs/Documents/fr76_76617.pdf[2] Additionally, OFAC amended an existing general license broadening its authorization related to the importation of certain Sudanese-origin services and adding authorization for activities related to Sudanese persons’ travel to the United States (see 31 C.F.R. 538.509). OFAC also made technical changes to the SSR, including changes to reflect the establishment of the independent state of South Sudan and the separation of the Government of the South Sudan from the Government of Sudan.[3] Despite OFAC’s announcement that the SSR would not apply to the newly independent South Sudan, significant restrictions still remained prohibiting U.S. persons from activities that: dealt in property or property interests of the Government of Sudan; benefitted Sudan or the Government of Sudan, related to the petroleum or petrochemical industry in Sudan, and engaging in exporting and importing activities from South Sudan that transit through Sudan. These restrictions were discussed more fully in a previous Fulbright Alert, found here.[4] So long as other U.S. export requirements are met including those imposed by the Export Administration Regulations.

-----Notice: We are providing the Fulbright Alert as a commentary on current legal issues, and it should not be considered legal advice, which depends on the facts of each situation. Receipt of the Fulbright Alert does not establish an attorney-client relationship. The listed attorneys and/or other attorneys may provide services in connection with a particular matter.

On December 1, 2011, U.S. District Court Judge A. Howard Matz vacated the conviction of and dismissed the indictment against Lindsey Manufacturing Company ("LMC") and two individual co-defendants, Keith E. Lindsey ("Lindsey"), and Steve K. Lee ("Lee") (collectively, the "Lindsey Defendants") because of prosecutorial misconduct. The case[1] was the first case since enactment of the U.S. Foreign Corrupt Practices Act ("FCPA" or the "Act") in which a corporate defendant was tried and convicted for FCPA violations.[2] In dismissing the indictment with prejudice, Judge Matz harshly criticized the prosecution team for having made so many varied "mistakes" over a lengthy period between 2008 and 2011 that "they add up to an unusual and extreme picture of a prosecution gone badly awry."[3] The forty-one page Order can be found here.

Judge Matz detailed in his Order what he found to be prosecutorial transgressions sufficiently serious to warrant dismissal with prejudice. In taking the action he did, Judge Matz distinguished his criticism of the prosecution team by pointing out that "In this Court's experience, almost all of the prosecutors in the Office of the United States Attorney for this district consistently display admirable professionalism, integrity and fairness."[4] The Department of Justice ("DOJ") has filed a Notice of Appeal in the case.

Background

Following a five week trial, the Lindsey Defendants were each convicted on May 10, 2011 on one count of conspiracy to violate the FCPA and five counts of FCPA violations. The jury deliberated for one day before returning its verdict. The defendants were charged with having bribed two high ranking officials of Mexico's state-owned utility company, Comisión Federal de Electricidad ("CFE"), to obtain contracts for LMC. Specifically, the Lindsey Defendants were charged with having used a Mexican national named Enrique Aguilar ("Aguilar")[5] and his company Grupo International de Asesores S.A. ("Grupo") to funnel the alleged bribes to the CFE officials.

The case was closely watched and is noteworthy for a number of reasons. First, as stated, it was the first FCPA case in recent history in which a corporate defendant had chosen to litigate the Government's charges to verdict. Second, several seminal issues were addressed, including the Government's broad interpretation of "foreign official" and "instrumentality" under the Act. Judge Matz ruled against the defendants on those issues, signaling a judicial willingness to side with the Government in its aggressive stance on substantive interpretation of the FCPA. Third, the case was heavily litigated by both sides, with the defendants having brought complaints of what they claimed to be prosecutorial misconduct to the Court's attention on several occasions before, during, and after trial. Prior to his ruling last week, while Judge Matz had shown concern during trial with certain actions taken by the Government, he noted in his Order that he had given the prosecution team significant leeway, citing strong judicial reluctance to find intentional prosecutorial misconduct.[6] Finally, despite the cited reluctance to find government misconduct, Judge Matz ultimately and "with deep regret" found in this case that the prosecution "was marred by" a wide "range of misconduct" and therefore "throws out the convictions" of the Lindsey Defendants.[7] The Court also cited its own failure during the fast-paced and at many times acrimonious trial in failing to see "the proverbial forest for the trees," stating that "it was difficult to step back and look into whether what was going on reflected not isolated acts but a pattern of invidious conduct."[8]

Findings Of Misconduct

The Order stated that several instances of misconduct on the part of the Government "undoubtedly affected the verdicts and thus substantially prejudiced the Lindsey Defendants."[9]

Findings of Pre-Indictment Misconduct

False and Misleading Warrant Affidavits

Judge Matz found that an affidavit executed in order to obtain a search warrant for LMC's business premises contained false statements. Specifically, the Court found that in more than one place the affidavit stated that LMC had made payments to another Aguilar controlled company when that was not the case.[10] Judge Matz held a pre-trial hearing on the matter under Franks v. Delaware, 438 U.S. 154 (1978), to address the false statements and determine if the warrant should be voided. At that hearing, according to the Order, the FBI agent who executed the final affidavit disclosed that one of the prosecutors had inserted the false statements into the agent's final executed affidavit without the agent's knowledge.[11] Judge Matz ultimately ordered production of all 14 drafts of the affidavit, after which it was revealed that the first 12 drafts did not contain the false statements. Nevertheless, at the Franks hearing on the affidavit the Judge found probable cause without the false statements and declined to void the search warrant.[12] In recounting the various acts of what the Court now found to have been misconduct, the Order also noted that the false language at issue was contained in five other affidavits executed after the first affidavit, and had been used to support search or seizure warrants in the case.

Finally, in his post-verdict consideration of what Judge Matz held to be cumulative prosecutorial misconduct, the Judge also noted that the first search warrant affidavit was additionally misleading in what it did not contain. He explained that during the Frankshearing on the first affidavit, the Government also disclosed for the first time that the affidavit had failed to include the fact that approximately $430,000 in the Grupo account used to fund the alleged bribes to the CFE officials came from someone other than LMC. The Order indicates that it was this information that led the Court to require the prosecution to produce all drafts of the affidavit.

Warrantless Search of Two LMC Buildings

Judge Matz also noted that FBI agents compounded the harm caused by the first affidavit containing the false information by searching not only the LMC building covered by the warrant, but also searching two LMC buildings that were not covered by the warrant.

Purposeful Insertion of Improper Language in Search Warrant

The Order also revealed that the FBI improperly reviewed electronically stored information ("ESI") found on seized LMC computers, as a result of improper language in the search warrant. According to Judge Matz, the language authorized the case agents instead of a "filter" team to review the ESI. The Court noted that it had previously found the error to be attributed to "clumsy drafting, not bad faith." However, in the Order, Judge Matz stated that although he still found "that this violation was not invidious . . . the improper language . . . was not present in 11 of the 14 versions of the warrant, thereby permitting the inference that the Government purposely inserted it in the final version."[13]

Grand Jury Testimony of FBI Agent

Judge Matz was particularly troubled by the grand jury testimony of one of the FBI agents ("the Agent"), who testified before the grand jury four times in order to obtain the indictment against the Lindsey Defendants. The Order addressed six instances of what the Court held amounted to false and or misleading testimony.[14]

During two of the Agent's grand jury appearances, according to the Order, the prosecutors displayed a chart connecting in an unbroken line both LMC and a company from another FCPA investigation to both Sorvill, the alleged intermediary in the other investigation, see n.10 supra, and Grupo. The Court found that by doing so, the Agent's testimony "suggest[ed] a non-existent link between LMC and Sorvill" and was similar to the false statements regarding Sorvill contained in the first search warrant affidavit. [15]

The Order also discussed the Agent's testimony regarding a July 3, 2006 contract between LMC and Grupo during which the Agent testified that the contract was created and executed in response to an IRS audit questioning the payment of 30% commissions to Grupo. Judge Matz corrected the record, saying that, "In fact, LMC had no notice of any audit when that contract was executed, and the IRS audit that LMC did learn about later on did not relate to tax year 2006 or to commissions."[16]

The Court said that prior to the grand jury testimony, the Agent received copies of several contracts totaling $8 million LMC had entered into with CFE before retaining Aguilar. The contracts were either in English or translated into English. In response to a grand juror's question as to whether Lindsey had a history of winning CFE contracts, the Agent nevertheless testified that LMC did not have much business with CFE before Aguilar became LMC's sales representative.

According to the Order, the Agent testified that in response to FBI questioning when the search warrants for the LMC premises were executed, Lee was interviewed and said that he "[d]idn't want to know. Just didn't want to know" what the 30% commission (to Grupo) was going to be used for.[17] Judge Matz noted in his Order that (a) the Agent was not present at the interview of Lee; (b) the FBI's memorandum of that interview contained no such statement; and (c) the prosecutors acknowledged that Lee never made such a statement.

The Agent testified to the grand jury, also as recounted in the Order, that in response to an IRS audit, Lee told LMC's bookkeeper to reclassify the Grupo commissions before turning documents over to LMC's accountant. The Order stated that, in fact, the conversation Lee had with the accountant was not related to an audit and, with one possible exception, the commissions were not reclassified.

In response to a question from a grand juror, the Order noted that the Agent testified that as much as 90-95% of the funds in the Grupo account came from LMC. However, in an earlier affidavit, the Agent had accurately stated that LMC's deposits into Grupo's account totaled only approximately 70% of the funds. Judge Matz noted in the Order that the "material difference between these sworn statements is something even [the FBI] acknowledged at trial."[18]

Judge Matz made special note of the testimony discussed in the latter four points above; all given during the Agent's final appearance before the grand jury on October 21, 2010, the day the indictment was returned against the Lindsey Defendants. The Judge found that each was "indisputably material," having been reflected in the Government's theories of the case before the grand jury and at trial. Judge Matz also noted that some of that testimony was directly responsive to questioning from the grand jury.[19]

Finally, the Order recited potentially exculpatory omissions in the Agent's grand jury testimony. While the prosecution correctly argued and Judge Matz acknowledged that the Government was not obligated to present exculpatory evidence to the grand jury, the Order stated that "While viewed in a vacuum, the Government…is correct…the omissions are not irrelevant because [the standard to be applied for the dismissal motion] is whether, in its totality the Government's conduct was so improper and harmful to the Defendants as to have violated their rights, undermined the very foundations of judicial integrity, or otherwise been so egregious as to require a deterrent sanction."[20]

Findings of Post-Indictment Misconduct

Failure to Produce the Agent's Grand Jury Testimony

In discussing what he considered to be additional misconduct following the indictment, Judge Matz acknowledged that the Agent's numerous errors in the grand jury testimony did not establish that perjury was knowingly committed. The Court speculated instead that "perhaps [the Agent] was sloppy, or lazy, or ill-prepared by the prosecutive team" and concluded that the prosecution had determined that the Agent would be a poor witness and "that its investigation was terribly flawed."[21] Judge Matz further concluded and cited the prosecution's acknowledgement that they wanted to keep the Agent from testifying in order to avoid questions about the investigation.

Thus, under established principles, if the Agent would not testify at trial, the Lindsey Defendants were not entitled to see transcripts of her grand jury testimony unless they contained exculpatory material. However, in the Order Judge Matz revealed that he had ordered the Agent to testify in a hearing on one of the Defendants' Motion to Suppress a statement he was alleged to have made during the search of the LMC premises. Following that hearing, "in light of several major problems that had surfaced in the suppression hearing testimony," and upon the Defendants' Motion For Production of all transcripts of the Agent's testimony, the Court inspected the grand jury testimony transcripts in camera and then ordered that the prosecution produce all transcripts of the Agent's grand jury testimony to the Lindsey Defendants.[22]

After having been admonished by the Court on several occasions for failing to meet discovery obligations, discussed in the Order, the prosecution represented on April 7, 2011 that it had conducted "a top to bottom review of discovery" and that "[w]e have done what we believe not only meets our obligation but exceeds it."[23] At the time of the representation, none of the Agent's grand jury testimony had been produced to the Lindsey Defendants, nor were any produced until eight days later and ten days after opening statements were given at trial. In the course of the post-verdict Motion To Dismiss activity, the prosecution disclosed that it had not turned over the transcript from the Agent's October 14, 2010 testimony.

Angela Aguilar's Privileged Communications

According to the Order, Angela Aguilar was in custody through the conclusion of the trial. Judge Matz had granted a "filter team" AUSA's ex parte application filed on January 28, 2011 to permit the prosecution to obtain telephone conversations recorded by the Bureau of Prison ("BOP") between Angela and Enrique Aguilar. Later, the prosecutors disclosed that as early as December 9, 2010, the lead prosecutor had obtained from BOP not only the phone conversations that were the subject of the ex parte application, but also copies of Angela Aguilar's emails, some of which included communications between Angela Aguilar and her attorneys. According to the Order, the prosecutors neither sought nor obtained the Court's permission to receive these emails and misrepresented how they had obtained them.[24]

Testimony Regarding Another Case

According to Judge Matz, the prosecutors improperly elicited testimony from a witness who pleaded guilty in a different case involving bribery of CFE officials. Even after a limiting instruction from Judge Matz, the prosecutors used this testimony in closing argument. Although Judge Matz had overruled an objection at the time, in dismissing the case, Judge Matz stated, "in retrospect, [the Court] should not have [overruled the objection]. . . . The suggestion that Lee and other LMC witnesses had any connection to [the prosecution's witness] or ever even knew anything about him was not only misleading, but contrary to the Court's ruling."[25]

"Willful Blindness" Closing Argument

Before closing arguments at trial, Judge Matz had rejected prosecutorial requests to give the jury stand-alone instructions regarding "deliberate ignorance" or "willful blindness." Despite this, during closing arguments, prosecutors stated that "the law is saying you can't turn a blind eye[.]"[26] Judge Matz sustained an objection to this statement, but the prosecutor then told the jury that the Lindsey Defendants "cannot see all of this smoke and all of these red flags and then close their eyes," and covered his eyes with his hands.[27] In the Order, Judge Matz carefully pointed out that the prosecutor at fault "was not directly or personally responsible for the numerous other forms of misconduct" and that his actions could have been "entirely unintentional".[28] Nevertheless, Judge Matz found that "Now that the Court has had the benefit of appraising . . . in light of the supplemental briefing [on the Motion to Dismiss] . . . the Court finds that this improper argument undoubtedly resonated with at least some of the weary jurors."[29]

Analysis and Conclusions – Lessons From the Lindsey Case

In his Order, Judge Matz made it clear that he was displeased by many of the actions of the prosecutors in this case, saying that, "The prosecutor's job isn't just to win, but to win fairly, staying well within the rules."[30] It is therefore tempting to interpret this case as a judicial attempt to curtail the aggressive enforcement strategies employed by the Government in FCPA investigations over the past several years, but it is not clear that the case will have such a pervasive impact.

Despite the ultimate dismissal and harsh words of the Court in its Order, during the trial Judge Matz ruled in the prosecution's favor on many motions, including eight previous motions to dismiss the indictment. Of those previous motions to dismiss, at least five were premised upon claims of prosecutorial misconduct. Equally important, Judge Matz ruled against the defendants on substantive motions challenging the Government's broad interpretation of the FCPA.

It is probable that Judge Matz's rebuke to the Lindsey prosecution team and resulting dismissal will instill caution in the Government in determining whether to seek indictment in the first instance and how it proceeds if it chooses to do so. For example, a factor the Court appeared to consider in dismissing the indictment against the Lindsey Defendants is that, in the Court's estimation, "[t]he case against the Lindsey Defendants was far from compelling."[31] However, Judge Matz included in his Order that the Lindsey Defendants are not entitled to a finding of factual innocence. He also pointed out the financial and emotional toll exacted on the Lindsey Defendants and stated clearly throughout his Order that "dismissing an indictment is a disfavored remedy."[32]

While the case is certainly a defeat for the Government and the second this year,[33] companies and individuals can take limited comfort from the Lindsey Case. As Charles E. DuRoss, the DOJ's Deputy Chief of the Fraud Section, stated in November of this year, the DOJ "will continue to follow evidence and bring [FCPA] charges when we think appropriate."[34] Although this statement, similar to others made in recent years by DOJ officials, was made prior to the Lindsey dismissal, there is little reason to believe we will see substantial Government retrenchment from its aggressive posture on the FCPA.

We can expect more FCPA cases to go to trial, and therefore more wins for both defendants and the prosecution. The Lindsey case demonstrates that defendants can and should strenuously challenge the Government when appropriate to do so. However, defendants have yet to achieve a trial ruling, much less a verdict, that significantly curbs the Government's broad reading and application of the FCPA in the last decade. Companies and individuals should continue to implement risk-based compliance programs designed to reasonably prevent or detect corruption issues in the first instance, rather than finding themselves in the position of challenging the Government at trial.

Fulbright's White Collar Crime, FCPA and International Anti-Corruption and Investigations Practice GroupsAttorneys in Fulbright's White Collar Crime, FCPA and International Anti-Corruption and Investigations Practice Groups are experienced in all phases of governmental investigations and criminal and civil litigation. They routinely handle the management of complex federal and state civil and criminal litigation on behalf of U.S. companies, including Fortune 500 corporations, their officers and directors, international corporations and entities, and individuals. Our attorneys are also experienced in the practice of preventative counseling and compliance programs. From a strategic perspective, this is important for reducing the risk of civil and criminal litigation.

----

[1] U.S. vs. Noriega, et al, U.S. District Court, Central District of California, Western Division of Los Angeles, Case #:2:10- cr- 10131-AHM-4(the "LindseyCase").

[5] Aguilar and his wife Angela Aguilar were also indicted as co-defendants in the case. Aguilar has not been arrested. Angela Aguilar was arrested and defended against a count of conspiracy to commit money laundering at trial. She was convicted, entered into a "time served" settlement with the prosecution, and has returned to Mexico.

[6] Order, at 1-2.

[7] Order, at 2, 28.

[8] Order, at 5.

[9] Order, at 36.

[10] A company also allegedly controlled by Aguilar by the name of Sorvill was the purported conduit for bribes in another FCPA investigation by the Department of Justice ("DOJ") in which one of the Lindsey case prosecutors was involved. Judge Matz noted that "the prosecutors pushed aggressively to link Sorvill to the Lindsey Defendants, when in fact there was no evidence even suggesting the Lindsey Defendants ever heard of Sorvill." Order, at 3.

[11] At the hearing, the AUSA responsible for insertion of the false statements said there had been a misunderstanding and that when he asked the agent to identify any errors in his changes the agent had not identified the statements the Court found to be false. Order, at 9.

[12] The prosecution's attempt at the post-verdict dismissal stage to rely on the Court's earlier Franks motion denial was rebuked by Judge Matz, who held that, "The issue at this point is … not whether there was sufficient, non-tainted cause to obtain a warrant, but whether the Government's submission to a … judge of an affidavit containing a material falsehood was part of an overall course of conduct that requires the sanction of dismissal." Order, at 9.

[13] Order, at 10.

[14] Order, at 11-12.

[15] Id., at 11.

[16] Id., at 11

[17] Id., at 12, citing the transcript of the grand jury testimony from October 21, 2010 at page 22.

[18] Id., at 12.

[19] Order, at 12.

[20] These omissions, described by the Lindsey Defendants as "an effort to conceal important and exculpatory information," included: (a) that Hurricane Wilma hit Mexico in July 2006, causing CFE to immediately obtain emergency restoration systems, and the first significant post-Aguilar contract between LMC and CFE was signed shortly thereafter; (b) that the IRS audit found no irregularities in LMC's payments to Grupo and no taxes owing; and (c) that a source other than LMC had deposited $433,000 into Grupo's account. Order, at 13 n.12.

[21] Order, at 13-14

[22] Order, at 15.

[23] Order, at 16 citing the Court's Docket 642, p. 47.

[24] Judge Matz found that the prosecutors' actions directly affecting only Angela Aguilar were nevertheless relevant to the dismissal motion (a) because the "broad legal principle" underlying all grounds for dismissal based on misconduct is that "the prosecution has the duty to comply with its legal obligations in every case"; and (b) because the Lindsey Defendants were accused of conspiring with Aguilar, and both Aguilars were accused of conspiring with each other. Order, at 18.

[33] Earlier this year, a mistrial was declared in the prosecution of the first four "Shot Show" defendants. See Transcript of Trial Record, U.S. v. Patel et. al, No. 09-cr-00335 (D.D.C. Jul. 7, 2011).

Actually Iranians had from the beginning said that they brought down the plane by hacking into its control link. Then came US confirmation of a lost drone without specifying type and also that there was not fire incident. So, there are now two possibilities, crash or hack. Since as per Pentagon it happened a week ago, and as per Iranians just hours ago, some one is lying here. Iranians were the first to disclose it so they get the score there. US only responded several hours later.

And there is more, here on wired, there were two articles a while back. One was about a virus that had infiltrated the control systems of the US drones. And the other article was about DARPA working hard to make that virus go away. Then this happens. You can draw your own conclusions. But these are not random events, since never till now a drone has gone haywire and into an adversaries airport. Drones might be stupid but they are not traitors by default settings that is. But those settings now seem to be edited and saved. Also why the RQ-170 would go haywire in Iran and not in Pakistan, Afghanistan, Korea or many other places it goes around. Why in Iran, the country that has the world's fastest growth rate in science and technology as per US government report "Science and engineering indicators: 2010"?

We need critical thinking here. Not just random rants.

(Anonymous Comment at WIRED MAGAZINE)

\Access to a downed U.S. stealth drone would offer plenty of scope for China to reverse engineer key technologies. Will Iran give it the chance?

The loss of a U.S. RQ-170 stealth drone over eastern Iran has led to speculation that the Unmanned Aerial Vehicle (UAV) will eventually find its way into Chinese hands. Access to the drone could allow China to use reverse engineering to incorporate key technologies into its own indigenous aerospace systems and to develop countermeasures that would make it harder for U.S. stealth UAVs and aircraft to operate near China. Iran has significant political, military, and financial incentives to provide such access, reversing the usual flow of technology from China to Iran.

Despite the claims of some Iranian officials, Iran lacks the technical capacity to exploit and duplicate the advanced technologies in the RQ-170 on its own. Providing access to China could therefore generate benefits in terms of expanded Iranian access to Chinese military technologies, potential future access to UAV countermeasures, and Chinese diplomatic support in Iran’s confrontation with the West over its nuclear program.

A robust arms sales relationship has existed between China and Iran since the early 1980s. China has supplied Iran with military hardware including fighter aircraft (F-7), fast-attack patrol vessels, anti-ship cruise missiles, and guidance technologies for use in Iran’s ballistic missile program. The dollar amount of official arms transfers in the decade 2000-2010 decreased from previous decades, but China continues to help Iran develop critical weapons programs. According to Iran’s semiofficial Mehr News agency, both Chinese and Russian officials have already made requests to inspect the RQ-170.

A recent National Defense University study by Phillip Saunders and myself looked at the history of China’s military aviation industry and gave numerous examples of how access to foreign aircraft designs and reverse engineering of components has helped China expand its aerospace technology capacity. In the wake of the Sino-Soviet split in 1960, China used reverse engineering to fill technical gaps and improve upon older Soviet designs. Access to restricted U.S. aircraft and aerospace technologies gained through third parties has also provided opportunities to apply reverse engineering. One commonly cited example is Chinese access to the F-16 gained through its close relationship with Pakistan. It’s difficult to determine the exact level of access China enjoyed, but open source references claim that Chinese technical personnel visiting Pakistan in the early 1980s were given the opportunity to examine the F-16 in detail (I recommend Wei Chen Lee’s excellent article “The Birth of a Salesman: China as an Arms Supplier”). Islamabad may have also transferred completed subsystems to China and provided access to the design and maintenance blueprints necessary to service the aircraft.

The Chinese military aviation industry’s technology base and ability to produce sophisticated aerospace systems has expanded rapidly over the past two decades, greatly improving its ability to exploit and potentially replicate technologies used in the RQ-170 drone. For example, China’s J-10 multi-role fighter incorporates metal alloys and composite materials for high strength and low weight. China developed the fourth generation J-11B fighter through a combination of coproduction and reverse engineering the Russian Su-27, with a particular focus on indigenizing subsystems. The unveiling of the J-20 stealth fighterprototype, which made its first test flight in January, demonstrates China’s ability to incorporate stealth technology in new aircraft designs.

China is also making significant efforts to develop and deploy its own UAV capabilities. In 2010, China displayed 25 different models of UAV at its biennial Zhuhai airshow. Officials representing China’s ASN Technology Group – one of several major UAV producers – claimed that the People’s Liberation Army is already operating two drones. The Institute for International Strategic Studies reported in its Military Balance 2010 that China has deployed several types of UAV for both “combat and reconnaissance” purposes, though it makes no specific mention of armed drones.Even if China hasn’t yet fielded an armed UAV, the number of models in advanced stages of development makes it clear that this capability will be part of its air power arsenal in the near future. The deployment of UAV systems supports the Chinese military’s doctrinal imperative of increasing “informationization” to improve situational awareness and adds another layer of remote targeting and strike capability which can enhance China’s ability to deny military access on its periphery.

Access to the RQ-170 would give Chinese engineers the opportunity to study the drone’s sensor systems, control and communication systems, and the materials and design elements that make it stealthy. Access to the drone might further allow engineers to understand how its subsystems are fused together and how it operates as an integrated whole. Even if the Chinese aerospace industry can’t use reverse engineering to produce an indigenous equivalent of the RQ-170, Chinese engineers could probably learn enough from the RQ-170 to develop improved countermeasures and defenses against it and similar systems. China is already devoting considerable attention to improving its air defenses and developing means to defeat U.S. stealth technology, and so access to the RQ-170 would facilitate Chinese efforts to understand how advanced U.S. UAVs operate and to devise new ways to exploit their operational weaknesses.

It’s unclear whether Iranian air defenses or countermeasures played a role in downing the RQ-170. A senior Pentagon official, speaking on condition of anonymity, told the Washington Post that there was a “95 percent chance” that the drone crashed due to technical malfunction.In later statements, U.S. officials flatly denied Iranian claims that a sophisticated cyber attack brought down the RQ-170, but have been less definitive about whether Iran might have used other means like GPS jamming to interfere with the drone’s flight.

But even if the loss of the RQ-170 over Iran was due to a technical malfunction, Chinese access to the drone may eventually help produce countermeasures and improved air defenses that make it harder for the United States to operate stealthy UAVs over hostile territory. Iran would be a prime customer for such systems; a Chinese commitment to sell UAVs and countermeasures might be part of Iran’s price tag for access to the RQ-170.

Joshua Wiseman is a Research Analyst at the Center for the Study of Chinese Military Affairs, part of the National Defense University’s Institute for National Strategic Studies. The views expressed are those of the author and do not reflect the official policy or position of the National Defense University, the Department of Defense, or the U.S. government.

Following Pakistan's ISI comes Mossad in the number 2 slot, MI 6 taking third and the CIA following up in fourth place.

In addition to the Top Ten list, most of the graphic outlines a series of assassinations, explosions, spying, cyber spying and "convenient accidents" that the Post ties to various intelligence organizations over the last ten years.

Finally, there are some charts which claim to be based on some of Richards Heuer's work regarding the demographics of spies; where they come from in government, how much education they have, etc. The graphic provides no comparative data to see if any of the categories identified are larger or smaller than they are in the relevant population from which they are drawn so it is difficult to draw conclusions but intriguing nonetheless.

Given the nature of the article and difficulty associated with making these kinds of judgements, I am not surprised at the results but it is still an interesting question to ask: Who has the world's best intel service?

Nuclear scientist Dr PK Iyengar, who passed into the ages this week, was uncompromising as far as national interests are concerned, recalls Dr AN Prasad
It is with a profound sense of respect and admiration for Dr PK Iyengar, with whom I had the privilege of working for a number of years, I write this. On December 21, the country lost a highly accomplished a scientist dedicated to the national cause.
Dr Iyengar's life was a saga of boundless pursuit of science extending beyond the frontiers of physics, which was his forte by education and specialisation. He was a firm believer that the key to the country's overall economic development lay in the advancement of science in its holistic sense and constantly strived to bring about scientific culture in whatever he did. He was quite uncompromising as far as national interests was concerned.

He was extremely forthright and fearless in expressing his views boldly however controversial they may be, unlike many even among the scientific community. He simply was averse to the very idea of 'toeing the line'.
One can say he represented a breed of self-respecting Indians, maintaining the identity of his own, perhaps resented by some of his pliable associates. It was always a pleasure to engage in intellectual conversations with him on innovative ideas. Though he gave an impression of being unyielding and stern, actually those who knew him well can vouch-safe that he was amenable to convincing arguments and quite open-minded. It was his nature that he would not accept an answer just to please others or under pressure. On a personal level, he was extremely kind at heart and hospitable.
Dr Iyengar started his scientific career in neutron-scattering, contributing to path-breaking research on lattice dynamics.

He built up an internationally recognised neutron-scattering group. Under the leadership of Dr Raja Ramanna, he played a key role in the peaceful nuclear explosion at Pokhran in 1974. As director of the Bhabha Atomic Research Centre, he motivated basic research in a wide range of fields and initiated new technologies like lasers and accelerators. Later, as chairman of the Atomic Energy Commission and Nuclear Power Corporation, he championed the cause of sustaining a strong indigenous nuclear power capability in pursuit of Dr Homi Bhabha's [ Images ] vision of long-term energy security and independence. He was terribly averse to our nuclear programmes being driven by major dependence on external sources, whether technology or supplies.
Iyengar was one of the few scientists who revelled in educating the public, especially those involved in making policies at the government level, on what nuclear energy was all about and its multifaceted applications in industry, agriculture, medicine apart from generating electricity. Production of an extremely informative and at the same time highly educative monograph as recently as in 2009 is illustrative of this. His exposition covers a wide spectrum starting with what science really is, efforts which went into developing nuclear science and methodology adopted for converting the same to technology indigenously, and astounding organisational effort involved.
He was quite forthright in expressing his strong views on controversial topics like nuclear testing and non-proliferation, in the long-term national security context.

Dr Iyengar felt strongly that deliberate attempts made by the developed countries for blocking the knowledge of nuclear science to India [ Images ] and placing restrictions on its development, were contrary to human dignity especially for a nation with an ancient history of amply demonstrated peaceful existence. However, on the flip side, he used to say with a degree of triumphant satisfaction, that 50 years of managing a nuclear programme with more than three decades of humiliation of discrimination in the international fora has not weakened the resolve of the country's scientists from making tremendous progress and come out stronger and be noticed, to the envy of even some of the developed countries!
In recent years, Dr Iyengar was visibly upset with the terms of the Indo-United States nuclear deal and has written and spoken extensively expressing his views without mincing words. It was not for the lack of faith in the US, with whom it would be good to have the best of relationships, especially strategic relationship, but he felt that in our eagerness to clinch the deal we have forsaken the rights of the future generations in this country. He firmly believed that there are weighty reasons why the nuclear deal is not in the best national interest. He went even to the extent of reasoning why the deal should be scrapped.
Dr Iyengar believed that a country can declare itself a weapons State when it has an arsenal in which all the devices stored are certified as far as their yield is concerned. He believed that this cannot be done through computer simulation alone, more so the thermo-nuclear devices.

The circumstances in which India tested its first nuclear device in 1974 were forced on it by the Indo-Pak war by which Bangladesh became an independent nation and many advanced countries had cast their neutrality to support the military regime of Pakistan. The Disarmament Committee in Geneva has been discussing nuclear disarmament for several decades and yet we do not see any agreement on the part of the weapons' countries to give up nuclear weapons. The global and regional security situations are in a dynamic mode. Under these circumstances, was it prudent for India to tie up its future by foregoing the nuclear test option, not withstanding the quibbling of words by our government? The answer should be obvious. India has its self-respect and self-interest to defend.
Dr Iyengar was also concerned that contrary to the oft-repeated pronouncements by our government, the terms of the nuclear agreement do not comply with the requirements of 'Full Civil Nuclear Cooperation' even in its simplest definition. On this we have been taken for a ride and our government seems to have meekly surrendered. While getting an opportunity to come out of embargoes is welcome, the question is whether it is on honourable terms commensurate with the status of scientific prowess achieved over the years and self-respect? After many decades of suffering and hard work, don't we deserve better?
While going by the present trend, the future is going to be full of struggle at every step, to the possible detriment of the indigenous nuclear power programme, which has been unduly rocked by this agreement. It is perhaps God's will that Dr Iyengar is not be alive to see his apprehensions if they unfold.
May his soul rest in peace!
Dr AN Prasad is a former director of Bhabha Atomic Research Centre
Dr AN Prasad

The protesters in the city, including children, carried placards and banners inscribed with slogans demanding protection from criminals.
The Hindus' protest in Balochistan came after the killing of Ravi Kumar, a young trader whose bullet-riddled body was found in Quetta after
his family failed to pay the ransom money to his abductors.
The members of the Hindu community raised slogans against the government for its failure to protect the minority communities.
Provincial Minister for Minorities Basant Lal Gulshan and Minister for Revenue Zamurkh Khan Achakzai addressed the protesting Hindus
and tried to pacify them.
Achakzai said the law enforcing agencies were constantly striving against the kidnapping gangs operating in Quetta and other parts of the
province.
"Police have booked many suspects and also carrying out raids in different localities, including Saryab and Pashtunabad areas of Quetta.
Soon, the criminals will be brought to book," he ensured.
http://economictimes.indiatimes.com/news/politics/nation/hindus-protest-in-pak-against-kidnappings-for-ransom/articleshow/11231264.cms
Pessimism rides high in Hindu community after
kidnappings
By Shehzad Baloch
December 24, 2011
Ravi Kumar is just one of many from the minority group, who have become targets. DESIGN: FAIZAN DAWOOD
QUETTA:
The recovery of another bullet-riddled body of a young Hindu trader in Balochistan has visibly shaken the confidence of the community
which is an indelible part of the province’s culture and contributes substantially to its economy.
The unfortunate 26-year-old Ravi Kumar was loading trucks with flour in Satellite Town on October 22 when a group of armed men
kidnapped him in broad daylight.
The kidnappers demanded Rs4 million in ransom for his release afterwards which meant that he remained in captivity for over two months.
After negotiations, the abductors agreed to have Rs1 million as ransom money. However, negotiations did not bear any fruit since on
December 13, it was only Kumar’s body which turned up in Satellite Town. Ravi’s family wanted to march along with the dead body towards
the chief minister’s house or the press club in order to register their protest.
However, the community suddenly withdrew their decision out of fear that it might spark religious conflicts in a province already marred by
ethnic and linguistic tensions.
“Police did not fully cooperate with us when Ravi was abducted,” stresses Ravi’s father, Kalyan Das.
He breaks into tears whenever his son’s name comes on his lips and is unable to narrate the macabre tale.
He is helped along the way by Ravi’s uncle, Dr Maher Chand, who speaks of the community’s marginalisation where their way of
life seems to have come under threat.
According to Maher, as many as 100 people belonging to the Hindu community have so far been kidnapped during the past three years in
the province.
Some of these victims returned safely to their homes after paying huge sums of money to their kidnappers. But many were not that fortunate.
“The killings have sent a clear message that we should pay ransom if we want to survive in Balochistan,” Dr Chand tells The Express
Tribune.
‘Soft targets’
Despite being a part of the government, Provincial Minister for Human Rights and Minorities Affairs Basant Lal Gulshan also seems
dissatisfied with the treatment being meted out to the Hindu community in Balochistan.
“Hindu people are soft targets and kidnapping gangs have come to believe that they can easily get ransom money from Hindu families since
they form a minority,” he laments.
However, his determination to stay on and fight for the rights of Baloch Hindus, has not flagged.
“Hindus are real sons of the soil of this region and we will not leave Balochistan at any cost. We love Pakistan and have as much rights on it
as any Muslim citizen,” Gulshan adds, with emotion manifest in his tone.
According to estimates of Hindu community itself, over 200,000 Hindu people are residing in different parts of Balochistan and most of them
are traders, shopkeepers and contributing substantially to the local economy.
Published in The Express Tribune, December 24th, 2011.
http://tribune.com.pk/story/311250/pessimism-rides-high-in-hindu-community-after-kidnappings/
Sit-in outside BA against Hindu trader’s killing
* Protesters demand resignation from authorities concerned
QUETTA: Hindu community staged a sit-in protest in front of the Balochistan Assembly on Friday, against the killing of Hindu trader Ravi
Kumar. The rally from Arya Samaj Mandir passed through different parts of the provincial capital. The atmosphere was fully charged as the
protesters were holding banners and placards and chanted slogans against the rising incidents of target killings and kidnapping for ransom
in the area. They demanded that the authorities concerned must resign, saying they are unable to provide security to the Hindus.
Hindu leaders Raday Sham and Dr Mhar Chand while addressing the protesters, said Hindu community have been residing in Balochistan
for the past many centuries and had been targeted for the past couple of years. The kidnapping for ransom has become a lucrative
business and Hindu community has become a soft target for the criminals. They killed five Hindu traders that had gone unnoticed. The
killings are a clear message that Hindus must pay money to criminals if they want to live here, they said, adding that the elected people and
tribal elders are not playing their due role.
They said it is a conspiracy to force the Hindu community to migrate from Balochistan. “We shall give a clear message to those elements
that we are the indigenous people of this region. We will not leave this land at any cost,” they added. Provincial Ministers Zamaruk Khan
Achakzai and Basant Lal Gulshan came to the protesters and condemned the killing of trader Ravi Kumar.
They assured them of proper help and said that, “we will raise the voice of Hindu community on the assembly floor.” They said civil society,
and tribal elders will play their due rule in this issue. They advised the Hindu community to make a committee so that they can meet the
Balochistan chief minister after his return from Islamabad.
http://www.dailytimes.com.pk/default.asp?page=2011\12\24\story_24-12-2011_pg7_15
Hindus in Pak rally against increasing kidnappings for ransom
Islamabad, Dec 24 : The Hindu community in Pakistan staged a protest outside the assembly in Balochistan province, Quetta city, against
unabated incidents of kidnappings for ransom.
The protestors took out a procession from Arya Samaj temple and marched through different parts of the city to express their anger against
the recent killing of a Hindu trader Ravi Kumar.
The community demanded that the authorities concerned must resign, saying they are unable to provide security to the Hindus, The Daily
Times reports.
Hindu leaders Raday Sham and Dr Mhar Chand while addressing the protesters, said Hindu community have been residing in Balochistan
for the past many centuries and had been targeted for the past couple of years.
They pointed out that the killings are a clear message that Hindus must pay money to criminals if they want to live in the city.
“They said it is a conspiracy to force the Hindu community to migrate from Balochistan. We shall give a clear message to those elements
that we are the indigenous people of this region. We will not leave this land at any cost,” they added.
Provincial Ministers Zamaruk Khan Achakzai and Basant Lal Gulshan came to the protesters, and assured the Hindu community of proper
help, saying that they “will raise the voice of the community on the assembly floor.” (ANI)
http://www.newkerala.com/news/2011/worldnews-133214.html
Sit-in outside BA against Hindu trader’s killing
* Protesters demand resignation from authorities concerned
QUETTA: Hindu community staged a sit-in protest in front of the Balochistan Assembly on Friday, against the killing of Hindu trader Ravi
Kumar. The rally from Arya Samaj Mandir passed through different parts of the provincial capital. The atmosphere was fully charged as the
protesters were holding banners and placards and chanted slogans against the rising incidents of target killings and kidnapping for ransom
in the area. They demanded that the authorities concerned must resign, saying they are unable to provide security to the Hindus.
Hindu leaders Raday Sham and Dr Mhar Chand while addressing the protesters, said Hindu community have been residing in Balochistan
for the past many centuries and had been targeted for the past couple of years. The kidnapping for ransom has become a lucrative
business and Hindu community has become a soft target for the criminals. They killed five Hindu traders that had gone unnoticed. The
killings are a clear message that Hindus must pay money to criminals if they want to live here, they said, adding that the elected people and
tribal elders are not playing their due role.
They said it is a conspiracy to force the Hindu community to migrate from Balochistan. “We shall give a clear message to those elements
that we are the indigenous people of this region. We will not leave this land at any cost,” they added. Provincial Ministers Zamaruk Khan
Achakzai and Basant Lal Gulshan came to the protesters and condemned the killing of trader Ravi Kumar.
They assured them of proper help and said that, “we will raise the voice of Hindu community on the assembly floor.” They said civil society,
and tribal elders will play their due rule in this issue. They advised the Hindu community to make a committee so that they can meet the
Balochistan chief minister after his return from Islamabad.
http://www.dailytimes.com.pk/default.asp?page=2011\12\24\story_24-12-2011_pg7_15
Quetta's Hindus demand govt to protect them
from kidnappers, killers
December 23, 2011
Members of the Hindu community raised slogans against the government for its failure to protect minorities. PHOTO: EXPRESS/ QAZI
USMAN/ FILE
QUETTA: Members of the Hindu community staged a protest demonstration in front of the Balochistan Assembly (BA) on Friday against
increasing incidents of kidnapping for ransom in the province.
The protestors took out a procession from Arya Samaj temple on Masjid Road and after marching through different parts of the city, staged
a protest demonstration in front of the BA building.
The protesting people, including children, were carrying placards and banners inscribed with slogans demanding protection from criminals.
Addressing the protestors, Raday Sham and Dr Maher Chand, members of Hindu Panchayat, said police should investigate the killing of
young Hindu trader Ravi Kumar, whose bullet-riddled body was found in Quetta after his family failed to pay the ransom money to his
abductors.
The members of the Hindu community raised slogans against the government for its failure to protect the life of those belonging to minority
communities.
Provincial minister for minorities Basant Lal Gulshan and Minister for Revenue Zamurkh Khan Achakzai addressed the protesting Hindu
community members and tried to pacify them.
Achakzai said that the law enforcing agencies were constantly striving against the kidnapping gangs operating in Quetta and other parts of
the province.
“Police have booked many suspects and also carrying out raids in different localities including Saryab and Pashtunabad areas of Quetta.
Soon, the criminals will be brought to book,” he ensured.
The protestors called off their protest after the provincial minster assured them that he will arrange a meeting between a delegation of Hindu
community and Chief Minister, to resolve the issues.
http://tribune.com.pk/story/310988/quettas-hindus-demand-govt-to-protect-them-from-kidnappers-killers/
Balochistan: Hindu trader killing sparks protest
Friday, December 23, 2011
Islamabad: A Hindu trader, who was kidnapped nearly three months ago, has been killed leading to community members staging a
demonstration outside the assembly in Balochistan province of southwest Pakistan on Friday.
The Hindu Panchayat organised the protest outside the provincial assembly in Quetta.
Leaders of the Hindu community said armed gangs had been kidnapping Hindu traders and youths for ransom and killing them if ransom
was not paid.
They demanded that the government should provide security and protection to Hindus.
Last week, several provincial ministers had assured the Hindu community that trader Ravi Kumar's killers would be brought to justice.
They made the assurance while speaking in the Balochistan Assembly on December 15.
Provincial minister Jay Prakash said Ravi Kumar was abducted by armed men from the bus terminal in Quetta about 90 days ago.
The abductors killed him after his family could not pay the ransom that had been demanded, Prakash said. However, it was not known when
exactly he was killed.
Dozens of Hindus have been kidnapped for ransom in Balochistan over the past two years.
Several Hindu families from the province have applied for asylum in India.
http://zeenews.india.com/news/south-asia/balochistan-hindu-trader-killing-sparks-protest_748378.html
Comments
Prithvi - Quetta
We are Living in Balochistan for thousands of year. The Community has Played a vital role in the Economic Development of Balochistan as
95%of Hindu Community is related to the Trade Business. Hindus are the most peaceful people of Pakistan. But After the Death of Nawab
Mohammad Akber khan Bugti,Hindus of Balochistan are feeling like Orphans as Nawab protected them from criminals till his last breath.
Hindus are living a miserable life in Pakistan these days. Hundreds of hindus have been kidnapped in last 4 years most of them were
released after paying all the money they have earned for their whole lives. While other hundreds of Hindus are Forced to pay Extortion
money to live here .Many Hindu families are Migrating to INDIA for the sake of their children,s life. The Tribal system which protected the
Hindus in past years has been weaken due to the recently developed situation in Balochistan by the security forces resulting the
Unbearable conditions for Hindus. We have stopped our children from going to schools and its nearly impossible for us to run our
businesses are we are continuously being targeting by the Kidnappers. And the most miserable thing is that there is no one to help. Even
police suggest us to pay Ransom and Get our Detainee released as Kidnapper have close links to provincial Ministers as stated by many
politicians and political parties. Now the only way left for is to Migrate somewhere else from Pakistan and seek Refuge.
Reply
Avinash Kumar - Quetta
Hindu Community is the oldest Community living in Balochistan For Hundreds of Years. About 95 % of the community is affiliated with Trade
Business.

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